Biden Wants to Double Capital Gains and Crack Down on Crypto Laundering: Reports

by · March 9, 2023

Biden Wants to Double Capital Gains and Crack Down on Crypto Laundering: Reports

US President Joe Biden’s upcoming budget proposal has some surprises for crypto traders and investors, including a proposed doubling of capital gains for certain investors and a crackdown on crypto-laundry sales.

The Biden administration is set to release its 2024 budget plan on March 9, which is reportedly aimed at reducing the deficit by nearly $3 trillion over the next decade. It also includes changes to crypto tax treatment aimed at raising around $24 billion, according to news reports.

One of those proposals includes ending a strategy in which a crypto trader sells assets at a loss for tax purposes, known as tax-loss harvesting, before buying them back immediately afterward, according to The Wall Street Journal.

Such a strategy is not permitted when stocks and bonds are involved under the current wash sale rules. However, crypto is currently not under the same rules as digital assets have not been classified as securities.

Now it seems the US government wants to change that.

Speaking to Cointelegraph, Danny Talwar of crypto tax software firm Koinly commented:

“This is an unavoidable consideration for the United States, which, if implemented, would see it on par with other jurisdictions such as Canada and Australia, where crypto-laundry sales apply.”

“If the rule is applied, the timing is significant as many crypto holders who entered the crypto space on the back of the 2021 market tops are suffering heavy losses,” he added.

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Related: What is crypto tax harvesting and how does it work?

The Biden budget also proposes to nearly double the capital gains tax for investors making at least $1 million to pay 39.6% on long-term investments, up from the current 20% tax rate. It also plans to raise income taxes on corporations and wealthy Americans, according to Bloomberg.

Update March 9 at 04:19 UTC: Added a clarification that the increased capital gains tax rate applies to a certain subset of investors, according to the Bloomberg report.